A TENSE standoff moved into its second day as police negotiated with a US man suspected of boarding a crowded school bus, shooting the driver dead and taking a 5-year-old boy at random with him into a rural bunker.

Multiple neighbours identified the suspect as Jimmy Lee Dykes, a 65-year-old retired truck driver who had moved to the Alabama neighborhood on a rutted red clay road more than a year ago.

It didn't take long before he developed a frightening reputation as a volatile man with anti-government views who threatened his neighbours at gunpoint and was vicious to wandering pets.

The boy was watching TV and getting medication sent from home, according to state Rep. Steve Clouse, who met with authorities and visited the boy's family. Mr Clouse said the bunker had food and electricity.

Authorities lowered medicine into the bunker for the boy after his captor agreed to it, Mr Clouse said.

Dozens of cars for police and FBI agents blocked the road's entrance. At least one ambulance was parked nearby. Homes on the road had been evacuated after authorities found what they believed to be a bomb on the property.

Police man a checkpoint near the home where the alleged bus shooter is barricaded himself and a 5-year-old hostage in an underground bunker in Midland City, Alabama.

Police negotiators tried to win the boy's safe release.

"As far as we know there is no relation at all. He just wanted a child for a hostage situation,'' said Michael Senn, a pastor who helped comfort traumatised children after the attack.

The situation remained unchanged for hours as negotiators continued talking to the suspect, Alabama State Trooper Charles Dysart told a news conference late on Wednesday. Earlier in the day, Sheriff Wally Olson said authorities had "no reason to believe that the child has been harmed.''

Local TV station WDHN obtained a police dispatch recording of the moment officers first arrived at the property, in which officers are heard saying that they were trying to communicate with Dykes through a PVC pipe leading into the shelter.

Authorities gave no details of the standoff, and it was unclear if Dykes made any demands.

Residents look over the school bus where a local man shot the driver dead and then kidnapped a boy just north of Midland City, Alabama. Picture: Danny Tindell

The standoff began after school Tuesday afternoon.

The bus driver, Charles Albert Poland Jr., 66, was hailed by locals as a hero who gave his life to protect the 21 students aboard the bus. Authorities say most of the students scrambled to the back of the bus when the gunman boarded and said he wanted two boys 6 to 8 years old.

When the gunman went down the aisle, authorities said, Poland tried to block him. That's when authorities say the driver was shot four times before the gunman grabbed the child at random and fled.

Neighbours said Dykes was a man who once beat a dog to death with a lead pipe, threatened to shoot children for setting foot on his property and patrolled his yard at night with a flashlight and a shotgun.

He had been scheduled to appear in court on Wednesday morning to answer charges he shot at his neighbours in a dispute last month over a speed bump on the road.

"He said his only regret was he didn't beat him to death all the way,'' Ms Wilbur said.

"If a man can kill a dog, and beat it with a lead pipe and brag about it, it's nothing until it's going to be people.''

Claudia Davis said he yelled and fired shots at her, her son and her baby grandson over damage Dykes claimed their truck did to a makeshift speed bump in the dirt road. No one was hurt.

"Before this happened, I would see him at several places and he would just stare a hole through me,'' Davis said.

"On Monday I saw him at a laundromat and he seen me when I was getting in my truck, and he just stared and stared and stared at me.''

Law enforcement personnel near the home where the school bus shooting suspect is barricaded. Picture: Jay Hare

Court records showed Dykes was arrested in Florida in 1995 for improper exhibition of a weapon, but the misdemeanour was dismissed. The circumstances of the arrest were not detailed in his criminal record. He was also arrested for marijuana possession in 2000.

The crisis in the town of 2300 people played out while lawmakers in Washington held congressional hearings to address gun violence - part of an ongoing national discourse that has ramped up since the December massacre of 20 young children and six adults at Connecticut elementary school.

Former Rep. Gabrielle Giffords, who was shot in the head during a shooting rampage in Arizona in January 2011, was testifying in favour of stricter gun controls.

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